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Mexico Waives Tax on Artists

Mexico City -- For almost 60 years, many artists have not paid a dime to the Tax Administration Service (SAT), the Mexican equivalent of the IRS.

More than 700 artists across Mexico take part in a Pago en Especie (Payment in Kind) program—the only one of its type in the world—that allows artists to pay federal income taxes with their own artwork.

Art collectors of Art Kabinett social media network hope more countries develop incentive plans to help the fine arts, as presently exists in Mexico.

In 1957, muralist David Alfaro Siqueiros, one of the most influential artists of his generation, approached the secretariat of finance, both pictured here, with a proposal to keep a friend and fellow artist out of jail for tax evasion: Let him pay his debt in art.

The agreement laid the foundation for Pago en Especie, which today is a public collection of nearly 7,000 paintings, sculptures, and graphics accepted as tax payments from some of Mexico’s best-known artists.

Mexico has the weakest tax revenues in the 34-country Organization for Economic Cooperation and Development and one of the lowest rates of tax revenue in all of Latin America.

At the SAT’s offices in central Mexico City, the scramble to recover fiscal revenue is always pressing.

But on the 15th floor, where the Pago en Especie resides, administrator Cristina López Beltrán is sitting easy. There is, after all, a social benefit to programs like this one. “Everyone loves this program,” she said, paging through a book of donated works currently in traveling exhibitions.

The program is simple—donations are made according to reported sales. If an artist sells between one and five pieces of art in a given year, he or she donates one piece to the federal government. If the artist sells between six and eight pieces, he or she donates two, and so on, with an annual cap of six donations.

Only painters, sculptors, and graphic artists can participate, though program administrators are currently considering whether to include performance art as an acceptable means of payment.

A committee of artists and curators oversees the donations process to ensure that the art received meets certain quality standards.

'National Heritage' Collection

If the art is of a particularly high caliber, it becomes part of the “national-heritage collection,” which is displayed in a permanent exhibit in Mexico City.

All other pieces are divided up and shipped across the country to fill public museums and administrative buildings. Certain pieces are also sent abroad as part of exhibitions coordinated with museums across the world. Last year alone, the program sent Pago en Especie pieces to 13 international galleries.

Mexico is one of several countries seeking to support the arts through tax incentives, which range from direct subsidies to tax credits for donations to organizations dedicated to the arts (as is the case in the United States).

Last year, the United Kingdom implemented a Cultural Gifts Scheme that allows individuals and corporations to donate artwork—defined as “any picture, print, book, manuscript, work of art, scientific object, or other thing which … is pre-eminent for its national, scientific, historic or artistic interest”—in exchange for a reduction in income tax and capital-gains liability. In 2012-13, tax reductions through the program totaled more than $536,000.

Mexican officials have never calculated the tax revenue lost to the Pago en Especie—a fact that could complicate any economic argument calling for its abolishment.

Unlike its counterparts in the United Kingdom and Ireland, the SAT has never appraised the artwork it receives in financial terms.

The number of pieces in its possession is the only statistic that the SAT records. In recent years, the government agency has been forced to purchase additional warehouses in Mexico City to store an ever-growing collection of paintings, graphics, and sculptures.